Though still very much a seller’s market, buyers saw some easing in October, particularly in Prince William and Prince Georges counties, but overall, prices are moving in all sorts of directions. We tend to see market adjustments throughout the year, but add some external financial influences, and the “whys” tend to vary.
Compared to October 2020, average home sale prices last month were up 5.1 percent in Arlington and Washington, D.C.; 14.3 percent in Fairfax County; 10 percent in Prince William County; 10.7 percent in Prince Georges County; and 6.4 percent in Montgomery County. Only Alexandria City saw an average sale price drop last month—2.2 percent compared to October 2021.
The month-to-month numbers are a little more mixed, however. Average sale prices dropped in September compared to August everywhere we cover, except for Prince Georges County. In October, however, average prices were back up everywhere except for Prince William and Prince Georges counties.
Prince William County, which had an average sale price of $510,715 in August, has seen a two-month drop, with average prices dipping to $505,539 in September and then a little more to $499,480 in October. It’s the first time the average sale price in Prince William County has dipped below the half-million mark since March.
A more encouraging sign for frustrated buyers is that days on market (DOM) have inched up a bit, giving them a little more time to consider their purchases. In Washington, D.C., homes averaged 27 days on market in October compared to 23 days in October 2020. In Arlington County, average DOM was 31 compared to 17 last year. While Alexandria City stayed the same at 20 DOM, Fairfax County increased its DOM from 16 in October 2020 to 22 last month. Prince William and Prince Georges counties showed a four-day and two-day increase, respectively as well. Montgomery County, however, saw its average DOM drop from 20 in October 2020 to just 18 days last month.
The challenge always is determining where we’re going from here. External financial influences on the market have kept us on alert since the beginning of the year.
One of the biggest stories is the current inflation rate rising most of the year. In October, the rate was 6.2 percent. In February that rate was 1.7 percent; it rose to 2.6 percent in March, 4.2 (April), 5.0 (May), 5.4 (June and July), 5.3 (August), and 5.4 (September). October’s 6.2 percent inflation rate was the highest single monthly inflation rate in 31 years. You have to go all the way back to November 1990 when the rate hit 6.3 percent.
But what does that mean? Unfortunately the answer is not that straightforward. Inflation can mean that home prices will continue to increase, but the higher the inflation the less value those dollars will have. Even with relatively low inflation over the past decade or so, we’ve seen that unfold.
For example, the average Fairfax County home sale price in October 2011 was $455,863. The average sale price last month in Fairfax County was $753,581. That $297,718 difference is a 65 percent increase on the $455,863. However, according to usinflationcalculator.com. A dollar in 2011 is the equivalent of $1.23 today. So adjusted for inflation, the 2011 average sale price would be $560,711. The $192,870 difference between that and today’s average sale price of $753,581 is not a 65 percent increase, but a 34 percent increase in value.
During increased inflation, the picture can be a little bleaker. For example, if the average sale prices over one year increased 5 percent but inflation is at 6 percent, the value of that asset dropped from one year to the next, even though the price increased.
The challenge is tracking all of the economy’s moving parts, so these analogies are not written in stone. Some services and products today are cheaper to perform or manufacture, making them less expensive than 10 years ago. At the same time, we have to keep our eye on everything from supply chain hiccups to material cost. But we continue to track, and we’re very interested as to the impact of sustained high inflation on home prices and the housing market.
In all, the best scenario is when buyers are happy with the good deals they’re getting on a home purchase, while sellers are thrilled at what they can get when they sell their home. As we move toward the end of the year, there can be an easing of activity, but the continued limited inventory looks to favor sellers at the moment.
Stay tuned for our year-end wrap up and the adventure that will be real estate in 2022!
Christopher Prawdzik and his wife Angela Logomasini are licensed Realtors® with Samson Properties in Alexandria and are members of the Northern Virginia Association of Realtors® Top Producer’s Club. Operating as D.C. Region Real Estate, they offer comprehensive real estate services, including 4½% full-service listings, throughout the entire Washington, D.C. real estate market. Angela is licensed in Virginia, Washington, D.C., and Maryland. Christopher is licensed in Virginia and Washington, D.C. In addition, Christopher holds a broker license in North Carolina and is affiliated with McGary & Associates.
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